Study Surgery

A. The time rate basis is when an employee is paid a basic amount per hour worked. A formula that can be used to calculate an employee’s basic wages would be: hours worked x basic rate of pay per hour.

If the hours worked are over the agreed basic hours for the employee, you will need to calculate overtime. Overtime is normally paid at ‘time and a half’ or ‘double time’.

Example: Laura is paid a basic wage of £5.20 per hour and overtime at time and a half for all hours worked over a 39-hour week. This week Laura worked a total of 42 hours.


To work out the total pay for the week:

Basic (39 hours x £5.20) £202.80
Overtime (3 hours x £5.20 x 1.5) £23.40
Total pay for the week £226.20


However, when we account for the pay, the overtime premium is usually classed as an indirect cost, while the remaining pay is classed as a direct cost. So, in this example, the labour cost will be classified as follows:

Direct cost (42 hours x £5.20) £218.40
Indirect cost (3 hours x £2.60) £7.80
Total pay for the week £226.20